SOA and Supply Chain Execution Software System

SOA and Supply Chain Execution Software System Thomas L. Ngo-Ye Sheldon B. Lubar School of Business University of Wisconsin-Milwaukee Milwaukee, WI 53201-0742 [email protected] Abstract In this research we investigate the impact of service-oriented architecture (SOA) on the development, implementation and maintenance of enterprise systems from the perspective of information technology (IT) innovation. Based on Lyytinen and Rose's (2003) three-set model of IT innovation, we conjecture that SOA is a systems development innovation and services innovation. Moreover, we argue that the above different aspects of IT innovation have different implications for various stakeholders of the enterprise systems. The evidences collected from scholarly journals and practitioner publications lend support to our propositions. Furthermore, we conduct an exploratory case study on a supply chain execution (SCE) software company to enrich the understanding of the phenomenon. We contribute to the IT innovation and SOA literature by theorizing the links between SOA and IT innovations. Our work offers support to the IT innovation model in the context of the emerging enterprise systems. Finally, our research could potentially help the practitioners to enhance their plans for the adoption and effective use of enterprise SOA. Keywords: SOA, supply chain execution software, IT innovation theory, enterprise systems development, customization

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I. Introduction In recent years, SOA has attracted significant attention from researchers of different disciplines (Cherbakov, Galambos, Harishankar, Kalyana, and Rackham, 2005; Lee, Shim, and Kim, 2010; Luthria and Rabhi, 2009; Papazoglou and Heuvel, 2007). The evolution in the computing world to SOA is a paradigm shift regarding the way computer applications are designed, developed, and deployed (Evans, 2003; Murray, 2004). SOA is seen as the answer to organizations’ quests for efficiency, adaptability, and flexibility (Erol, Sauser, and Boardman, 2009). However, little is known about how SOA can provide business value to a real organization (Choi, Nazareth, and Jain, 2010). Therefore we undertake this research starting with a solid IS theory foundation and at the same time, seek empirical evidences. The main research objective of this study is to apply Lyytinen and Rose's (2003) model of IT innovation to SOA and examine its impacts on the development, implementation and maintenance of enterprise systems. The research methodology used involves conducting literature review to examine how the characteristics of enterprise systems development and services change as a result of adopting SOA. We also perform an exploratory empirical case study on a SCE software company. This case study provides specific examples and facts about SOA and its impacts on enterprise systems. The empirical evidences collaborate with our theoretical propositions. The potential contributions of this research include extending the understanding of SOA as an IT innovation and its impact on different stakeholders of enterprise systems. It could also be valuable to management considering the adoption and implementation of SOA.

II. IT Innovation Theory Swanson (1994) extends Daft's (1978)’s dual-core model of organizational innovation to a three-core IS innovation theory. In addition to Daft’s original administrative core and technical core, Swanson (1994) argues that to reflect the pervasive IT effects there should be a third core – an IT core whereby IT innovations are confined to the IT administrative and technical processes. The IT innovations in the administrative core mainly affect administrative kinds of processes but do not directly influence core business. The IT innovations in the technical core are embedded in the core business processes, products, and services.

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Lyytinen and Rose (2003) add a new dimension—IT based innovations, which refers to new software and hardware architectures and services, and new telecommunication capability. System development IT innovation (Lyytinen and Rose, 2003) is mapped to type one IT innovation in Swanson's (1994) tri-core. Lyytinen and Rose combine the administrative core (type two) and technical core (type three) of Swanson (1994) into services IT innovation. Lyytinen and Rose (2003) use Internet computing as an example to illuminate and validate the three-set model of IT innovation. To generalize their findings, Lyytinen and Rose call for research to apply the three-set model to other waves of IT innovations. This serves as one of our motivations of examining SOA as an IT innovation. Although there are some studies referring to Lyytinen and Rose (2003), such as the study of software reuse as IT innovation (Sherif, Zmud, and Browne, 2006), so far we have not found any published work applying Lyytinen and Rose (2003)’s three-set model to the SOA context. The only remotely related work is a study attempting to map SOA adoption levels to Swanson (1994)’s tri-core model (Haines, 2004). Thus we intent to pioneer the empirical work of applying Lyytinen and Rose (2003)’s three-set model to the enterprise SOA area.

III. Theoretical Arguments and Analyses Systems Development Innovation The separation of the service interface from implementation (Ferris and Farrell, 2003) enables modifying the detailed implementation without substantial impact on the interface. Thus, SOA minimizes the effects on other applications and make it easy to update and maintain (Hagel, 2002). Widely accepted industry SOA and Web Services standards enable seamless and flexible interactions across applications for internal and external business processes (Zhang and Huang, 2004). Now SOA has become increasingly popular as a new approach for organizations to develop flexible and agile architecture (Zhang and Tanniru, 2005). Open standard-based SOA applications facilitate efficient application development and component reuse. SOA helps to reduce duplicate software codes in different systems and decrease the number of proprietary interfaces in the dislodged systems (Samtani and Sadhwani, 2002). Built on modular, loosely coupled software components, SOA facilitates an ―assembly line approach‖ in application development. Thus, SOA will shorten the enterprise application development lifecycle. SOA can increase Fifth Pre-ICIS workshop on ES Research, St Louis 2010 3

productivity, reduce cost, speed development time, and deal with larger programmatic complexity and variety (Evans, 2003). Moreover, SOA-based enterprise application is easier to adapt to the rapid changes in the environments (Huang and Hu, 2004). Compared to traditional approaches of middleware and EAI, SOA is a cost efficient way to integrate different systems at the application level (Huang and Hu, 2004). SOA is better at bridging heterogeneous systems and improving business process integration because of the use of open standards (Evans, 2003; Huang and Hu, 2004). Therefore, we can infer: Proposition 1: SOA has the property of systems development innovation and presents an immediate impact on enterprise systems development and application developers.

Services Innovation Aggregating SOA components from various sources and creating composite SOA applications will allow services and the portal provider to add new value to the users (Evans, 2003). SOA can assist to automate previously manual business processes (Huang and Hu, 2004; Kreger, 2003). This improvement makes the administrative core processes and technical core processes more efficient. SOA and Web Services technology enable new enterprise architectures to provide strategic advantage by leveraging existing assets and externalizing useful business services (Arsanjani, Hailpern, Martin, and Tarr, 2002). SOA can also help companies free up and expose their business processes and functionalities as software services (Evans, 2003). SOA permits companies to sell their internal services to external organizations that need such services. Thus, SOA can aid companies generate additional revenue (Evans, 2003; Lim and Wen, 2003). SOA facilitates business-to-business integration (Evans, 2003). SOA can help collaboration among companies, allowing them to share accurate information in a timely manner (Huang and Hu, 2004; Samtani and Sadhwani, 2002). SOA facilitates real-time and dynamic business process. For example, SOA technology can be used to construct a real time e-procurement application in the context of B2B supply chain integration (Chen and Meixell, 2003).

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By breaking ―information silos‖ and sharing information, SOA can help expand the value of products and services delivered to customers (Hagel, 2002; Lim and Wen, 2003) or even create new products and services with SOA (Hagel and Brown, 2001). SOA makes the IT infrastructure more flexible and agile in response to internal and external changes. Companies will have further flexibility in selecting suppliers and partners in a dynamic business network environment (Evans, 2003; Samtani and Sadhwani, 2002). Service orientation can play an important role to enable an organization to operate in a value network of customers and suppliers supported by real-time information flow (Cherbakov, Galambos, Harishankar, Kalyana, and Rackham, 2005); therefore, SOA can enhance organizational agility (Huang and Hu, 2004; Bieberstein, Bose, Walker, and Lynch, 2005). SOA helps improve customer intimacy, retention and value (Huang and Hu, 2004) and increase customer satisfaction (Evans, 2003). Moreover, SOA enables mass customization based on the users’ profiles and preferences. Thus, the dynamic SOA applications will be constructed on the fly and enhance business agility (Evans, 2003). Thus, SOA is a source of sustainable competitive advantage through organizational agility (Huang and Hu, 2004). Therefore, we can infer: Proposition 2: SOA has the property of services innovation and presents a potential impact on business services performance and bottom line.

IV. Empirical Study of a SCE Software Company In the above section, we applied the IS innovation theory to conjecture the effects of adopting SOA on organizations. However, what are the real impacts of SOA adoption on enterprise system development, implementation and maintenance? Answers to these questions are important to researchers and practitioners interested in the enterprise systems. In this exploratory study, we attempt to shed light on this important issue with an empirical study. Our purpose is to examine the phenomenon of the impact of adopting SOA on enterprise systems from the established IS innovation theory. The contribution of research conducted with this approach lie in enhancing our understanding of the real world phenomenon and theoretical explication (Calder, Phillips, and Tybout, 1981; Chaffee, 1996; Daugherty, Eastin, and Bright, 2008).

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Research Design Because the exploratory nature of our research question, we adopt the traditional case study approach (Benbasat, Goldstein, and Mead, 1987; Eisenhardt, 1989). The object of this study is a leading SCE software company, with revenue of around $250M in 2007. To preserve its privacy, we refer it as W in this paper. We collect data through informal interview with a Senior Software Engineer who had worked at W for a year. We also collect public available documents such as news release, industry comments, and company product descriptions from W’s website. We next report the findings of W’s SOA initiative and the impacts on enterprise systems.

Findings W’s SCE software system includes a suite of products – warehouse management system (WMS), transportation management system, and workforce management system. In recent years, W emphasizes on SOA as system platform, business process orchestration, and composite application. SOA’s Impact on Products Development Re-write products from the ground up In the so-called ―Enterprise SOA – software developer view‖, the existing software infrastructure is replaced with a complete SOA design (Gulledge and Deller, 2009). To take the full advantage of SOA, W re-built its core software products from the ground up using the SOA framework. Technically it uses Microsoft .NET framework for the implementation. Enables a flexible research and development structure Because of the component-based nature of SOA, W can flexibly re-deploy its research and development resources (engineers). A large percentage of resources are shared resources not tied down to a particular software product such as WMS. As the market and client demands change, W can swiftly relocate the shared resources to the software product project that has the most strategic impact. Without SOA, it would be impossible to move resources from one product development project to the next, because engineers with skills of working under one monopoly system will find daunting difficulties to adapt to a totally different system.

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Re-use SOA exposes the business functions as services, which can be called upon from various applications. SOA also provides the benefit of facilitating software re-use. Resources do not need to re-invent the wheel again. As one business function is created as a service and published in the repository, many applications can invoke the service. For example, placing a product on hold is modeled as a service. It can be employed in different scenarios or applications for different reasons, such as per customer request of holdup the order or a manufacturer’s request of product recall. Because SOA enables re-use, the amount of coding required to create business processes is decreased. It drives down the development costs and shortens the development time cycle. Therefore, SOA has tangible and positive impact on enterprise system vendor’s software product developments. It is consistent with our proposition that SOA is a system development innovation and affect software development. SOA’s Impact on System Services and Clients In W, besides selling its internal developed standard software products to client organizations, a major source of revenue is implementing the SCE software system for the clients. Like many enterprise systems providers, W plays both the software vendor role and the IT consultant role. At W, the implementation service department takes on the responsibility to install, configure, customize, and support system ―go-live‖ for clients.

Client Extension Layer

Implementation Customization Layer

Standard Products Layer

Infrastructure Layer

Figure 1: SOA Framework Layers

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Proprietary SOA framework and layers W’s proprietary SOA framework separates software programs into four layers (see Figure 1). The first or bottom layer is the infrastructure layer. It is the technical foundation for standard products above. The infrastructure layer provides general services to the standard products, communicating and integrating different components of W’s systems and third-party software. The second layer is the W’s standard products. It uses the services provided by the infrastructure layer. The standard products can be configured according to pre-planned possible scenarios of business processes. Because adopting and modeling the best practice of the industry, the standard products will satisfy most of the requirements of the clients. However, most times the clients have special needs that cannot be satisfied by configuration only. Customizing the enterprise system standard product is needed (Haines, Goodhue, and Gattiker, 2006). Facilitates customizations survive upgrades Usually customizing an enterprise system is costly and risky. Because customizing involves changing the source codes of the original standard product, it causes thorny maintenance and upgrade issue. When the next version of the product is released, clients face the dilemma of upgrading the system with costly re-customizing or staying with the older version and forego the benefit of new features in the new release. In W’s SOA framework, the difficulty of customizing is addressed by separating the standard product codes and customizing codes in different layers of services (see Figure 1). At the third layer of W’s SOA framework, it is the implementation customization layer, where implementation service engineers place their project specific modifications. The customization codes are physically and logically separated from the standard product codes. Different layers communicate via standard interface. The implementation details are transparent; therefore, when the next new product release is available, the customizations on the old version can remain while the standard product layer is upgraded. Because the standard product codes adhere to the SOA principle of separating interface from implementation (Cherbakov, Galambos, Harishankar, Kalyana, and Rackham, 2005), the change of implementation details does not affect clients’ usage of the system. SOA and the intentionally layered structure ensure the safety of technology investment. From W or enterprise system vendor’s perspective, when new and improved technology is available, they can be adopted and incorporated in the bottom two layers of SOA, which is transparent to the clients.

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This gives W the technical flexibility. For the clients, its investment in W’s enterprise system is safeguarded, as the customization can carry over to the future product upgrade. Empowers client with development tools At the fourth or top layer of W’s SOA, it is the client extension layer. The client may customize the standard product if it has the technical know-how. The client knows its internal business process and monitors market conditions. Consequently, the client is in the position to make quick adaption of the system with some simple customization. W provides a mature set of development tools to enable clients to perform customization effectively. The customizations created by the client are separated from the implementation service customizations and the standard product codes. SOA and the layered approach enable engineers to trace the problem to a specific layer when debugging an issue. The clear separations of different entities who write codes enhance the specialization and coordination. Programmers at each layer can focus on the skills needed to perform tasks essential to the success of the particular layer. Infrastructure layer people can grow expertise in very technical knowledge of integration and produce efficient processing. The standard product layer people focus on extending the system with new features to incorporate new best practices such as store-to-store transfers and home service delivery. The implementation team specializes in extending existing standard products to satisfy the clients’ needs. Finally the client’s technical staffs can be the master of customizing various reports, messages shown on screen, and dashboard for the executives. Therefore, our above findings indicate SOA is a service innovation and has profound impacts on the services an enterprise system vendor organization provides. SOA also affects the bottom line by safeguard clients’ customizations to survive through system upgrade and empower clients with tools to perform some simple customizations themselves.

V. Conclusion From the above exploratory case study and examining the literature, we find evidences consistent with our theoretical conjectures that SOA is IT innovation. The managerial implication of this research is that practitioners can use our study as the starting point to evaluate the SOA adoption and use. Different types of IT innovation may originate for different reasons and have dissimilar impacts (Daft, 1978; Lyytinen and Rose, 2003; Swanson, 1994). Some organizations may adopt SOA for the reason of improving systems development of its internal standard software products, when SOA is regarded as a systems development innovation. Other organizations may adopt Fifth Pre-ICIS workshop on ES Research, St Louis 2010 9

SOA to innovate core business processes, products, and services, when SOA is viewed as a services innovation. In each of the above cases, SOA adoption and use have different shareholders with different rationale and motivations. Therefore, the realization of SOA adoption and use of the above different cases may have dissimilar impacts on the organization. In the future we will conduct a theory-driven, rigorous, and confirmatory multi-site case study (Lyytinen and Rose, 2003) by interviewing multiple companies. The empirical results will be used to validate the tentative conclusion of this study.

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